Fundamental understanding of the molecular mechanism governing osteoblast differentiation is essential for developing novel therapeutics for osteoporosis and bone fracture. Transglutaminases TG2 and FXIIIa promote osteoblast differentiation in vitro, and expression of these proteins is restricted to the hypertrophic zone of the embryonic growth plate, suggesting their role in the regulation of periosteal bone formation and matrix mineralization. Further, the presence of circulating autoantibodies against TG2 in diabetes and celiac disease correlates with short stature and osteopenia, implicating involvement of transglutaminases in both bone development and bone homeostasis. Molecular mechanisms of the transglutaminase-dependent regulation of osteoblast differentiation and function are yet unknown. Our studies revealed transglutaminase-induced modulation of several signaling pathways essential for osteogenesis, in particular activation of the &#946;-catenin signaling accompanied by inhibition of Notch and PKA pathways. Thus, we hypothesize that 1) TG2 and FXIIIa synergistically regulate embryonic bone development and adult bone maintenance by promoting osteoblast differentiation and matrix mineralization, and 2) this regulation is mediated by a cross-talk between &#946;-catenin, Notch, and PKA signaling pathways. To test this hypothesis, we will generate tissue-specific TG2/FXIIIa double knockout animals and examine their skeletal development and bone metabolism. We will also identify the key signaling pathways mediating the transglutaminase-induced osteoblast differentiation in vitro, and will delineate interactions between these pathways. The proposed studies are expected to offer new insights into the mechanisms of skeletal development, and provide background for development of novel strategies for therapeutic manipulation with bone metabolism in vivo and for bone tissue bioengineering in vitro.